scholarly journals Re-testing Wagner's Law: Structural breaks and disaggregated data for South Africa

2017 ◽  
Vol 9 (4(J)) ◽  
pp. 49-61
Author(s):  
Mthokozisi Mlilo ◽  
Matamela Netshikulwe
Keyword(s):  
South Africa ◽  
Structural Breaks ◽  
Government Expenditure ◽  
Active Role ◽  
Output Growth ◽  
Causality Test ◽  
Wagner’S Law ◽  
Education Expenditures ◽  
Wagner's Law ◽  
The Government

Direction of causality between government expenditure and output growth is pertinent for a developing country since a sizeable volume of economic resources is in the hands of the public sector. This paper investigates the Wagner's law in South Africa over the post-apartheid era, 1994-2015. This paper is unique to present studies since it uses disaggregated government expenditure and controls for structural breaks. The Granger non-causality test of Toda & Yamamoto, a superior technique compared to conventional Granger causality testing, is employed and this paper finds no support for Wagner's law. However, there is causality running from total government and education expenditures to output. This finding is in line with the Keynesian framework. It is recommended in the paper that the government should take an active role in promoting output growth through increases in education expenditures in particular.

scholarly journals Re-testing Wagner’s Law: Structural breaks and disaggregated data for South Africa

2017 ◽  
Vol 9 (4) ◽  
pp. 49
Author(s):  
Mthokozisi Mlilo ◽  
Matamela Netshikulwe
Keyword(s):  
South Africa ◽  
Structural Breaks ◽  
Government Expenditure ◽  
Active Role ◽  
Output Growth ◽  
Causality Test ◽  
Wagner’S Law ◽  
Education Expenditures ◽  
Wagner's Law ◽  
The Government

Direction of causality between government expenditure and output growth is pertinent for a developing country since a sizeable volume of economic resources is in the hands of the public sector. This paper investigates the Wagner's law in South Africa over the post-apartheid era, 1994-2015. This paper is unique to present studies since it uses disaggregated government expenditure and controls for structural breaks. The Granger non-causality test of Toda & Yamamoto, a superior technique compared to conventional Granger causality testing, is employed and this paper finds no support for Wagner's law. However, there is causality running from total government and education expenditures to output. This finding is in line with the Keynesian framework. It is recommended in the paper that the government should take an active role in promoting output growth through increases in education expenditures in particular.

PENGUJIAN WAGNER'S LAW VERSUS KEYNESIAN HYPOTHESIS: PENDEKATAN REGIONAL INDONESIA

2021 ◽  
Vol 2 (2) ◽  
pp. 181-193
Author(s):  
Esti Pasaribu ◽  
Septriani Septriani
Keyword(s):  
Government Expenditure ◽  
Granger Causality Test ◽  
Empirical Theory ◽  
Causality Test ◽  
Wagner’S Law ◽  
Long Run ◽  
Wagner's Law ◽  
The Government ◽  
The Relationship ◽  
Positive Effect

In this paper, we tested the Wagner’s Law against the Keynesian Hypothesis for Indonesia using granger causality test. After conducting theoretical and empirical theory, this paper is analysing the relationship between government expenditure and GDP percapita. The long run parameters and causality test found valid Wagners’ Law in Indonesia not Keynesian Hypothesis. The results reveal a positive and statistically significant long run effect running from economic growth toward the government expenditure refer to Wagner’s Law in Indonesia. Further more, the growth of population is giving a positive effect for government expenditure also.

The Nexus between Government Expenditure and Economic Growth: Evidence of the Wagner’s Law in Kuwait

2019 ◽  
Vol 15 (1) ◽  
Author(s):  
Ali Ebaid ◽  
Zakaria Bahari
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Time Series Data ◽  
Government Expenditure ◽  
Policy Instrument ◽  
Series Data ◽  
Causality Test ◽  
Wagner’S Law ◽  
Per Capita ◽  
Wagner's Law

Abstract This study is the first attempt to examine the validity of the Wagner’s law hypothesis by employing time-series data over the period from 1970 to 2015 in Kuwait. In this paper, the causal relationship between government expenditure and economic growth is tested by conducting the Granger non-causality test developed by (Toda, H. Y., and T. Yamamoto. 1995. “Statistical Inference in Vector Autoregressions with Possibly Integrated Processes.” Journal of Econometrics 66 (1): 225–250.) and (Dolado, J. J., and H. Lütkepohl. 1996. “Making Wald Tests Work for Cointegrated VAR Systems.” Econometric Reviews 15 (4): 369–386.). The empirical results support the unidirectional causality running from government spending to economic growth. This occurs only when real government expenditure per capita is a proxy for state activity and real gross domestic product (GDP) per capita is a measure of economic growth. This implies that Wagner’s law does not apply for Kuwait’s economy, and the Keynesian proposition of government spending as a policy instrument that encourages and leads economic growth is supported by the data used.

scholarly journals The Validity of Wagner’s Law in India: A Post-liberalisation Analysis

2019 ◽  
pp. 1-13 ◽  
Author(s):  
Suraj Sharma ◽  
Surendra Singh
Keyword(s):  
Granger Causality ◽  
Urban Population ◽  
Public Expenditure ◽  
Government Expenditure ◽  
National Income ◽  
Causality Test ◽  
Wagner’S Law ◽  
Long Run ◽  
Percent Increase ◽  
Wagner's Law

Aims: The present study attempts to analyse the behavior of government expenditure in relation to national income using most appropriate advanced econometric techniques to test the Wagner’s law of increasing State’s activity in Indian scenario during the post-liberalisation period of 1988 to 2017. Data: The study uses the IMF database entitled “International Financial Statistics” and World Bank database entitled “World Development Indicators” for testing Wagner’s law for the Indian economy. Methodology: The study employs appropriate econometric techniques to our model where government expenditure is used as regressand and gross domestic product and urbanisation is used as regressors. The study first investigates for unit roots in data using ADF and PP tests. Further, to investigate any co-integration among variables the study employed Johansen co-integration test. Once co-integration is confirmed, a vector error correction model has been estimated and lastly, Granger causality test is applied to check for any causality. Results: The results of Vector Error Correction Model reveal that both the Gross Domestic Product and the urban population have a positive and statistically significant effect on government expenditure in the long-run. Ceteris paribus, every 1.0 percent increase in GDP leads 0.36 percent increase in government expenditure. On the other hand, 1.0 percent increase in urban population leads to a 3.75 percent increase in government expenditure. The Granger causality results divulge that there is unidirectional causality running from urban population to government expenditure, whereas neither unidirectional nor bidirectional causality was found between GDP and public expenditure. In short-run, neither GDP nor urban population influences public expenditure. Conclusion: To sum up, the present investigation provides support for Wagner’s law in case of India in the long run only. It has been found that urbanisation has a greater impact on public expenditure than the national income (GDP) and which is also supported by Granger causality test showing significant unidirectional causality running from level of urbanisation to government expenditure.

Testing Wagner's Law For The European Union Economies

2011 ◽  
Vol 18 (4) ◽  
Author(s):  
Stella Karagianni ◽  
Maria Pempetzoglou ◽  
Soultana Strikou
Keyword(s):  
Government Expenditure ◽  
National Income ◽  
Likelihood Method ◽  
The European Union ◽  
Causality Test ◽  
Wagner’S Law ◽  
Econometric Methods ◽  
Long Run ◽  
Time Period ◽  
Wagner's Law

This paper examines the validity of Wagner’s law in the EU-15 member-states for the time period 1949-1998. For investigating the existence of a long run and causal relationship between government expenditure and national income, three of the most advanced econometric methods, the Engle-Granger cointegration test, the Johansen maximum likelihood method and the Granger causality test have been applied to six alternative functional interpretations of the law. The results are very ambiguous and our main findings suggest that the validity or invalidity of Wagner’s law is very sensitive to the method applied.

Wagner’s law and governments’ functions: granularity matters

2019 ◽  
Vol 46 (2) ◽  
pp. 446-466 ◽  
Author(s):  
Joao Jalles
Keyword(s):  
Panel Data ◽  
Government Spending ◽  
Functional Form ◽  
Emerging Market ◽  
Content Type ◽  
Wagner’S Law ◽  
Potential Gdp ◽  
Wagner's Law ◽  
The Law ◽  
The Government

Purpose The purpose of this paper is to assess the responses of different categories of government spending to changes in economic activity. In other words, the authors empirically revisit the validation of the Wagner’s law in a sample of 61 advanced and emerging market economies between 1995 and 2015. Design/methodology/approach The authors do so via panel data instrumental variables and time-series SUR approaches. Findings Evidence from panel data analyses show that the Wagner’s law seems more prevalent in advanced economies and when countries are growing above potential. However, such result depends on the government spending category under scrutiny and the functional form used. Country-specific analysis revealed relatively more cases satisfying Wagner’s proposition within the emerging markets sample. The authors also found evidence of counter-cyclicality in several spending items. All in all, the Wagner’s regularity seems more the exception than the norm. Originality/value While in the literature on the size of the public sector with respect to a country’s level of economic development has received much attention, the authors make several novel contributions: since some economists criticized Wagner’s law because of ambiguity of the measurement of government expenditure (Musgrave, 1969), instead of looking at aggregate public expenditures, the authors go much more granular into the different functions of government (to this end, the authors use the Classification of Functions of the Government nomenclature). The authors check the validity of the Law via an instrumental variable approach in a panel setting; after that, the authors take into account the phase of the business cycle using a new filtering technique to compute potential GDP (output gap); then, the authors cross-check the baseline results by considering alternative functional form specifications of the Law; and finally, the authors look at individual countries one at the time via SUR analysis.

scholarly journals Bank-Based Financial Development and Economic Growth: Time-Varying Causality Analysis for Egypt

2018 ◽  
Vol 10 (4) ◽  
pp. 123
Author(s):  
Amira Akl Ahmed
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Structural Breaks ◽  
Growth Time ◽  
Time Varying ◽  
Causality Analysis ◽  
Causality Test ◽  
Full Sample ◽  
Rolling Window ◽  
The Government

The bootstrap approach to Toda-Yamamoto (1995) modified causality test is applied in a rolling window of fixed size onto Egyptian data during 1960-2016 to examine time-varying links between economic growth (EG) and bank-based financial development (BBFD). Full sample results indicated the existence of unidirectional causality running from BBFD to EG, however; instability tests revealed the presence of structural breaks. Given the misleading inferences made using the full sample, the rolling window procedure is applied. Bidirectional time-varying causality between EG and BBFD was detected. Reasons behind declining the fraction of credit provided to private business sector to GDP in recent years include, mainly, credit crunch and expansion of credit to the government and partially to economic slowdown. Adoption of fiscal reforms and promotion of innovative financial tools suitable for the needs of small and medium-sized enterprises is highly recommended to enhance the role of banking system in promoting economic growth.

WAGNER'S LAW REVISITED: A NOTE FROM SOUTH AFRICA

2012 ◽  
Vol 80 (2) ◽  
pp. 200-208 ◽  
Author(s):  
KOJO MENYAH ◽  
YEMANE WOLDE-RUFAEL
Keyword(s):  
South Africa ◽  
Wagner’S Law ◽  
Wagner's Law
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